Trade marks increase business valuation

Written by IP Guardian on 1 August 2022

How to use trade marks to increase your business valuation.

Founders and business owners understand that a trade mark protects their company logo and brand name.  However, the value of the trade mark can exceed this and substantially contributes to valuation of a start-up or an established company.

When Nike founder Phil Knight hired a designer in 1971, the price he paid for the iconic swoosh emblem $35.

TM example - Trade marks increase business valuation - IP Guardian Pty Ltd

The brand was valued by Forbes in 2022 at an estimated US$39.3 billion. What an amazing return on the initial $35 outlay. This establishes the importance of a trade mark and shows that a significant amount of value from a company will come from its brand and intangible intellectual property assets.

While many start-ups understandably focus on building their businesses by increasing users and customers they should not forget to also create a unique brand and ensure it is protected by trade marks in any country in which they currently have or expect to have a market for their goods or services.

Ideally the creation of a unique brand should come right at the beginning along with a minimum viable product development (MVP).  It can be expensive and time intensive to rebrand products or services because an  initial brand name was chosen without the proper due diligence. Unfortunately it is common not to pay too much attention to the trade mark due diligence process until it is too late and a company is forced to rebrand as they are mistakenly infringed an existing trade mark or they find our their chosen brand is not able to be registered as a trade mark.

It is important to have a brand creation strategy which help companies create a unique trade mark which becomes identity of their brand. It is important for business owners and start-up founders to understand that a trade mark should not be descriptive or an explanation of your products and/or service but rather it should create an unique impression in mind of customers so that they can identify your company with ease.

The best trade marks are those that are not descriptive but can be easily identified. This has the potential to create significant value and therefore increased the valuation of the company as in the Nike example.

We recommend some steps when creating a new brand.

IDENTIFICATION

Good trade marks are those that are not descriptive and some of the best trade marks are even made up words that have no meaning beyond the name of the brand.

Always create a short list of names and have this reviewed by a trade mark attorney.

As an example, Nike does not describe shoes, however we understand that it is a shoe brand due to marketing and brand awareness. In short, the trade mark has done what it was intended to do.

BRAND VALUATION

Companies like Nike, Procter & Gamble , Google and Apple all have brand values of several billion dollars. Every brand started as a small brand and small business often undervalue their own brands due to a lack of awareness. In many cases trade marks and intellectual property may not make it onto the balance sheet. It is important to remember that brands not only boost sales but can also deliver those sales at a premium price and protect margin.

SECURE YOUR BRAND

Large companies have billion dollar valuations of their brands because they have protected their brand using the applicable trade mark laws. When a trademark is registered it is readily enforceable. Registered trade marks are initially registered for 10 years and can be renewed indefinitely so long as they are being correctly and continually used.

WHY CHOOSE IP GUARDIAN?

The trade mark team at IP Guardian are experts in assisting our clients’ choose the correct trade mark and ensure it is protected.  If you require assistance, contact our team who would be happy to assist you with your matter.

 

 

 

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